Challenges in multiple markets have led analysts to repeatedly downgrade earnings forecasts for PZ Cussons (PZC) over the past couple of years. A profit warning for the first half of its 2018 financial year was no different, with estimates for that period trimmed again. Management expects operating profit to be 10 per cent lower than the prior period, despite slightly higher revenue.
While the Nigerian naira has stabilised against the US dollar, credit availability has been tight during the first half. That, along with the impact of several years of imported inflation, continued to dampen consumer spending in what is the consumer group’s largest market. Bulk milk and electricals sales have borne the brunt of the downturn in demand, with the former also suffering from competitive pricing pressure. The group was forced to take a £12m exceptional charge against the rapid devaluation of the Naira last year. Management is planning new product launches and is expanding its distribution in the hope of offsetting this.
Inflation has also weighed on profitability in the UK, where marketing initiatives across its Imperial Leather, Carex and Original Source brands are planned. The beauty division has been more robust, particularly across its St Tropez, Sanctuary, Charles Worthington and Fudge brands. Asia Pacific was another bright spot. In Australia, profitability improved across all categories of personal care, home care and food and nutrition.
